Community Services Accepts Individuals and Staff of Closing Agency

In the wake of a Buffalo human service agency’s bankruptcy last week, other organizations scrambled to ensure more than 200 clients with physical and developmental disabilities or traumatic brain injuries continued receiving services, officials said Tuesday.

Debt-ridden Phoenix Frontier Inc. shut its doors Friday as a result of its Chapter 7 bankruptcy filing in U.S. Bankruptcy Court Western District of New York.

By Monday, several other agencies stepped in to accommodate most of Phoenix Frontier’s clients.

“No one was left in an unsafe condition. That was really critical,” said Rhonda Frederick, president of the Developmental Disabilities Alliance of Western New York, a collaborative of about 45 area agencies. “As a community, Western New York really rallied and made sure people were safe.”

Community Services for the Developmentally Disabled took over operation of a day program for about 70 clients at two sites, one on Leroy Avenue and another in Wheatfield.

Clients in those programs continued to show up as usual on Monday.

Nineteen former Phoenix Frontier employees were hired to keep the programs going, said Mark R. Foley, president and chief executive officer of Community Services, which also operates day habilitation sites on Genesee Street and in Lackawanna.

“We basically had four days or so to step in and take over what was going on,” Foley said. “We were hoping to have complete continuity of the services.”

Goodwill Industries of Western New York, meanwhile, assumed contracts that will keep 80 people with developmental disabilities working at the agency’s William Street workshop, where they can perform light manufacturing work, packaging assembly and collating. Some of the workers will report to Goodwill’s facility as early as today.

“It’s a sad story that a nonprofit agency had to shut down. But the good news story is the rest of the nonprofit community came together to help out,” said Thomas Lynch, president and chief executive officer. “The amount of cooperation was unbelievable.”

People Inc. arranged for new providers to take on 52 people who participated in Phoenix Frontier’s traumatic brain injury program under a contract with the state Health Department.

“It was quite a little scramble, but we were able to do it,” said Frederick, chief operating officer at People Inc., one of the area’s largest human services providers.

Phoenix Frontier listed debts to more than 100 creditors – totalling $1 million to $10 million – in its filing.

The agency’s financial problems came to light earlier this year in a lawsuit by Jack K. Manganello, its former president and chief executive officer, who was fired in March.

The case revealed an agency in fiscal turmoil, with $133,000 owed to the Internal Revenue Service in overdue taxes, $164,000 owed to the state Office of the Medicaid Inspector General for overcharges to the state’s Medicaid program and $175,000 owed to Key Bank.

“The losses were continuing even with extreme belt-tightening,” said William F. Savino, an attorney representing Phoenix Frontier. “The board had the foresight to close down the doors before it was unable to pay its own payroll or was locked out of its bank accounts.”

Some employees said they first learned of the closure last Tuesday, when chief executive officer Sandra Heath made an announcement alongside representatives from the state Office for People with Developmental Disabilities, which signed off on the transfer of clients to other agencies.

“I don’t feel that the board gave us a chance. We did ask to go Chapter 11 to reorganize,” said one employee, who spoke on the condition her identity be withheld. “It’s really sad. That place has been there since 1965. We had some very angry families.”

Employees received their final checks on Friday, but some said the checks bounced.

Morris Horwitz, trustee in the bankruptcy case, said the judge in the case will be asked to direct Key Bank to honor all the payroll and health insurance premium checks issued to employees.

“Those people are entitled to pay,” Horwitz said. “We’re aware of it and we’re working on it.”